Jeff Dachis Has Designs on TV's Dollars

Jeff Dachis is on a long riff about the business value of two guys sharing information about their sandwiches -- one with mustard, one mayo -- when he utters The Word.

Jeff Dachis thinks social can do for brands what display advertising has not: get major marketers to really buy into the web and start to loosen TV's grip on the big bucks.

"This sharing thing, this connecting, this participating, this engaging thing is going to alter the face of business. If you look at it as a continuation from 1994, for me, this is just part of a long set of " -- he pauses -- "recontextualizations. I'll say it now with confidence as I did then and you can skewer me if you like, because I don't think for one second that anyone will doubt that the words that I spoke then were the truth. Bob Simon was the one that wasn't getting it." A pause. "I say that with tongue in cheek."

Let's put this in -- apologies -- context. Bob Simon is the longtime "60 Minutes" correspondent who in 2000 had a prime-time field day with Mr. Dachis, then in his early 30s and worth hundreds of millions of dollars from co-founding the interactive agency Razorfish in the mid-1990s. When Mr. Dachis started talking about "recontextualizing" American business on camera, Mr. Simon let him have it. "You know, there are people out there, such as myself, who have trouble with the word recontextualize." And it only got worse from there.

Fast forward 11 years, and there are still people trying to figure out what Jeff Dachis is doing, but now the head-scratching's going on via a thread on the Q-and-A site Quora. Only it's not that complicated. If the value of Razorfish came from helping companies recont--, er, shift their processes and models from an analog world to a digital one, Dachis Group is about adapting enterprises once again, this time for the chaos of social.

Mr. Dachis believes that there's a very profitable, strategic strata of work to be done over and above what we now understand as the daily grind of social-media marketing: you know, buying social ads and promoted tweets and growing followers for brands on Facebook and Twitter. He calls it social-business design and, in theory at least, it touches a lot more than the marketing department. Social goes way up the org chart to the C-suite and cuts across business functions like information technology, customer service and human resources and affects activities like product development and employee relations.

"Nobody appreciates how big an opportunity there is ," said Chris Pacitti, general partner at Austin Ventures, the VC firm that 's backed Dachis to the tune of $80 million so far. "We saw a lot of companies fighting over this more narrow opportunity and made a conscious choice to head in a different direction."

The path Dachis didn't take is that of a social-media marketing agency and that 's caused some confusion about what Dachis Group is . Mr. Pacitti's fine with that . He and Mr. Dachis believe that it'll all become clear quite when, as soon as next month, the company begins to roll out an ambitious-sounding data-and-analytics platform that will connect soft social metrics to hard business ones, crunching numbers from tens of thousands of sources -- everything from structured, contextual and crowdsourced data to self-reported information from client companies. The idea is to not just listen to what people are saying about brands, but to, as Mr. Dachis put it, "drive action."

Here's his pitch, again in riff form: "Let me show you how the value of converting a 'like' into a fan into a community participant into an advocate. What's the value of an advocate who is echoing and amplifying your brand into the marketplace? What's the cost of converting a like into a fan into a community member into an advocate? If I can show you the investment dollar it takes to convert a lightweight engagement into a heavily engaged participant, might you not consider spending more money to create those advocates vs. spending money on that TV commercial?"

Mr. Dachis thinks social can do for brands what display advertising has not: get major marketers to really buy into the web and start to loosen TV's grip on the big bucks.

Old-school and expensive as it may be, TV's held its ground because it offers advertisers engagement and efficient reach. (In 2010, according to Kantar, TV spending was up over 10%, growing slightly faster than internet display advertising, and that 's on a much larger base.) With TV, marketers know what they're getting. With social, not so much. Sure, Facebook and Twitter are soaking up consumers' time and attention like digital leeches, and brands are responding with incremental spending. Yet absent is a fine understanding of the return on investment, a strategic understanding of what all this activity is doing.

These applications are why Mr. Dachis' concept has appeal to a VC. Consultancies, after all, aren't typically the kind of company that figures high on the list of possible investments for the likes of an Austin Ventures. But Mr. Dachis and Mr. Pacitti came up with an atypical growth strategy fit for a fast-moving scene where there's not a high cost of entry for competition and there are some big players, like IBM, Deloitte and McKinsey, with their sights on the market. The strategy: Scale up quickly with acquisitions and develop this analytics tool.

Not long after a 2008 launch, Mr. Dachis began to assemble a diverse collection of little companies that together give the company some geographic reach as well as an esoteric range of skill sets. There's Xplane, which uses visual communications, like drawings of the sort that used to appear in the defunct Business 2.0, to help convey business process change. There's Powered, a collection of social consultancies. And there's the Facebook developer Stuzo. There were also big hires like the former Forrester analyst Peter Kim, recently promoted to chief strategy officer.

So far, the strategy is paying off. Mr. Dachis said his company is profitable and growing at a faster clip than did Razorfish at a comparable point in its life. (He declined to share revenue figures.) Becoming more than a relatively small consultancy, of course, will hinge on the success of that data-and-analytics platform, on which subject Mr. Dachis is rather cagey.

Not that he's terribly forthcoming on the consulting portion of his business. Dachis Group isn't quite a black box -- I did after all persuade him to connect me with one client -- but it isn't a marvel of transparency, either. The list on the company website includes Coke, BP, Samsung, HBO and Philips, but there are no case studies to accompany them.

The client I talked to, Sherri Maxson, director-interactive at US Cellular, has just hired Dachis Group, with whom she worked at a previous job, at DeVry University. There the firm helped integrate social listening into DeVry's customer-service processes and established a training and certification program for social. At US Cellular, Dachis will help develop a center of excellence and orchestrate the brand's agency relationships around social.

"Every company feels like they're behind the eight ball," she said. "They feel they need to get everybody out there in social space. Dachis Group helped us realize that 's not entirely true. You have to empower the right parts of your organization."

The way Ms. Maxson explained it, the concept behind the Dachis Group makes a ton of sense. Whether there's enough long-term business out there for it, only time will tell. I asked Mr. Pacitti whether there's concern that we're just in another bubble, this one inflated by hot air about social. "I think there are some subcategories that are frenzied," he said, "but there's evidence that the broad trend has real sustainability."

And, Mr. Pacitti added, Mr. Dachis' rise and fall during the turn-of -the-century bubble only made him more valuable as the leader of a startup.

"He's the perfect entrepreneur in that he had the wealth of experience but also some very valuable scar tissue," Mr. Pacitti said. "To me the most successful people have done well, but they've also faced challenges. The ones you want to back are the ones that learned the right lessons along the way. "